Tens of millions of consumers today are facing financial difficulties ranging from late payments on their utility bills to foreclosure on their homes. Job loss, illness, overspending, and other problems can weigh in, putting untold pressures on the American family.

Not every financial situation should mean imminent ruin, although taking action sooner rather than later can go far in turning your condition around. Smart budgeting, credit counseling, debt consolidation, and bankruptcy are four do it yourself (DIY) avenues for you to explore; chances are you’ll be taking one or more paths in order to improve your financial condition.

Smart Budgeting

What is smart budgeting? Essentially, it is a budgeting plan that makes sense for you. This means being realistic and developing a plan that works. That doesn’t mean setting pie-in-the-sky goals, near impossible requirements whereby you think you’ll correct many years of financial problems in twelve months or less or pay off your mortgage quicker when you’re still on the brink of foreclosure.

Step by step changes can bring about real results, helping your conquer your problems gradually. This also means negotiating payments with creditors or finding out a way to work with bill collectors. Print out a money tip road map to help you get back on track.

Credit Counseling

Although a “do it yourself” method can work for some people, others may find that professional assistance can go far in helping them conquer the debt monster. Credit counseling organizations can help you develop a repayment plan with your creditors, help you track your bills, an develop a workable budget for you.

A few things to keep in mind: not all credit counselors are on the up and up, some charge very high fees, while others may promise more than what they can deliver. For example, when a creditor says you can pay just pennies on the dollar for your debt, be suspicious. Learn about fees and other costs before agreeing for assistance and check references!

Debt Consolidation

One way to reduce your credit costs is to consolidate your debt, oftentimes by taking out a second mortgage or a home equity line of credit. You’ll be putting your home up as collateral which means that if you stop making payments or make them late you could lose your home.

Certain tax advantages exist when consolidating a loan; check with your financial adviser to learn more.

Personal Bankruptcy

One way to discharge all or some of your debt is to file for personal bankruptcy. Chapter 7 bankruptcy is liquidation of your assets, whereby mostly everything you own is sold off except for exempt assets, which vary from state to state. You’ll be required to take a “means test” to ensure that your income does not exceed a certain amount.

Chapter 13 bankruptcy is less drastic, allowing you to keep a car or your home as long as you keep up payments, while discharging some if not all of your unsecured debt. Changes to the US Bankruptcy Code in 2005 has made personal bankruptcy a less desirable option as some previously forgiven obligations remain in place. Contact an attorney familiar with tax law who can advise you.

Financial Resolution

There is no magic solution to financial problems which means patience and adjusting as you go are important attributes for the person who wants to get back on his feet again. Creating a sensible plan and sticking with it is a good start; seeking professional guidance may be the best choice that you make.

Tags: budget, credit counseling, Debt Consolidation, finances, personal bankruptcy, tax attorney